Tricky business of tech acquisition

The big news in recent times is the back-firing of HP’s acquisition of British software company Autonomy last year. HP paid a whopping $11.1B to acquire Autonomy even when it’s CFO was against the deal. HP took a charge of $8.8b citing accounting improprieties done by Autonomy to inflate company value. Of course the question is how come HP’s scrutiny did not see that before making the big decision to acquire. This happened under the last CEO Leo, even though current CEO Meg Whitman voted for it as a board member.

We have seen a few other acquisitions gone wrong during last few years. HP leads the list with two others – Palm and EDS. Palm was acquired in 2010 for $1.2b to get HP into the hand-held smart device business. But that did not work. The EDS acquisition in 2008 at $13.9b was aimed at competing against IBM’s Global Services. Now HP has taken $8b charge and there is rumors of a potential sale of that unit.

Microsoft acquired eQuantive in 2007 for $6.3b, but took a write-down of $6.2b in 2011. Cisco acquired Pure Digital (makers of the Flip Video Camcorder) for $590m for reasons unclear (get into consumer electronic business, far away from its core networking gears). It closed that business last year.

eBay acquired Skype under Meg Whitman’s watch in 2005 for $3.3b. Somehow that goal of combining client’s voice to its core auction business did not pan out. Finally eBay sold that unit to Silver Lake partners for $1.9b. Last year Microsoft bought Skype for $8.9b!

IBM and Oracle on the other hand, seem to have acquired several companies successfully adding to their growth in business and scope. The trick lies in the strategy group looking carefully as to why such a move makes sense and how to blend the acquired product and technology to its existing fabric. Shareholders of these public companies are an unhappy lot as the write downs affect the stock value, as seen in HP’s stock price.

Jnan Dash is a Director at Compassites. He is a technology visionary and executive consultant in the Silicon Valley. Jnan is a well-known expert in the software industry. Prior to joining Oracle in 1992, he spent 16 years at IBM in various positions including development of the DB2 family of products and in charge of IBM’s database architecture. Jnan is a frequent speaker at global industry forums on the future of software technology.

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